Welcome to "Field Report," a series where Advisory Board experts weigh in on what they are hearing from health care organizations across the country. In this edition, Megan Director, who spends her time working with executive teams on system service line strategy and business development, shares her take on a common question she is getting from strategy leaders.
The past few months, I’ve heard a common question from the health system strategy leaders I work with: how should Covid-19 impact my service line growth strategy?
The answer is that two major changes are needed—first, addressing a new set of problems, and second, revisiting an evergreen problem that Covid-19 has laid bare.
- The new factors: Covid-19 has completely transformed traditional top-of-funnel entry points to the service line due to changing consumer behavior and preferences, site-of-care shifts, and telehealth. Therefore, the same growth tactics we have relied on in the past won't cut it in a Covid-19 world—we will need new growth tactics.
- Old problem, new urgency: Covid-19 has not inherently changed the fundamental processes service lines should be using to evaluate service line growth opportunities and strategy. That doesn't mean leaders are off the hook for change though—because the reality is that many service lines did not have the principled approach they needed even before the pandemic. These deficits have been laid bare as programs have struggled to agilely respond to the rapid changes in demand, finances, and purchaser behavior brought on by Covid-19.
Fortunately, there's still time to get this right. Service line leaders should use the coming months as they plan for 2021 as an opportunity to reset their approach to growth. Read on to learn what has and hasn't changed about service line growth during Covid-19, and how you can set your program up for success going forward.
Even before Covid-19, service line growth strategy needed a refresh
For the past decade, health system service line strategy has largely been anchored in supply-side assumptions. What do we need to build? What technologies should we buy? Which physicians do we employ?
In September, we polled over one hundred service line leaders on what has driven recent service line investment evaluations. The top impetus cited was physician interest in offering a new service, with an internal desire to be a center of excellence second in line. Analysis of market-specific demand and feedback from consumers fell far behind, which would be a red flag to any strategic planner.
In an honest moment, these are passive approaches to growth, based not on an assessment of what the market and consumers need, but internal factors such as ability and desire to offer a service. Increasingly, strategic planners are looking to pivot that approach and are asking how they can sharpen their approaches to service line growth based on external market conditions.
There are several reasons for this renewed focus. Most impactful has been the shift in specialty volumes away from acute procedural offerings toward outpatient and medical services. This has led to more competition for those profitable acute procedures that have traditional differentiated service line centers of excellence.
Just as important, however, has been the evolution of consumer and purchaser expectations. Payers and employers have become more active in steering patients to lower-cost specialty providers who can demonstrate appropriate utilization of advanced procedures. Physicians also have more risk on the table for episodic cost that can influence their specialty referrals.
To adapt to these dynamics, service line leaders need to focus more on what their individual market and consumers need, not just what they can do. This means being more attuned to the needs of all service line customers; enhancing services further upstream to capture demand; and developing aligned offerings across the full continuum of care.
It's no longer a "build it and they will come" scenario for service lines. Leaders need to build the right services for their individual markets. In some situations, it will still be the right answer to invest in the latest technology—but in others, it might be better to invest in a care management program to appeal to local cost-sensitive purchasers.
How has Covid-19 changed service line growth strategy?
Service lines have been able to get away with this more inward approach to growth decisions in the past because the external pressures I mentioned earlier have admittedly been shifting glacially. now amid the pandemic, service line leaders are expected to balance a challenging set of priorities.
On the one hand, service lines have been the growth engine of health systems, and that's even more true now as health systems look to make up all this lost revenue from the pandemic. But at the same time, capital is tighter than ever, and purchasers of all stripes are looking for health systems to lower the cost of expensive specialty care. This means service lines have little room for error when it comes to making investment decisions.
Beyond increasing the urgency to make smart growth decisions, Covid-19 has upended the demand for services at the top-of-funnel, including how patients enter the service line. Key changes we are seeing in service line growth dynamics include:
Patients are avoiding both urgent and elective care, including screenings, and are less willing or able to travel for care they do seek.
Virtual care has become an expected option from patients and providers alike, although to a varying extent across service lines.
Ambulatory care settings have become more attractive to patients avoiding the hospital due to risk of exposure (and higher co-pays)—and freestanding competitors are gearing up to meet demand.
Legacy referral patterns have been upset by the closure or consolidation of some physician practices, and the emergence of disruptive primary care groups like ChenMed and One Medical.
I would argue these aren't all challenges. Some of these transformations may present opportunities for health systems that can get ahead of them, such as competing on telehealth, or providing care closer to home for patients who may otherwise have travelled. Strategy and service line leaders will therefore need to partner to determine what are the right opportunities for each service line in today's environment.
4 steps to build a strong growth strategy foundation
Considering the current state of affairs, it's understandable that we are all looking for a silver bullet for how to grow in a Covid-mediated world. Unfortunately, there isn't one. Service line growth requires developing a plan that is tailored to your market, customers, and institution.
Advisory Board has ample research to help execute on a growth plan, such as improving access, building physician referral networks, and attracting patient consumers—but tactics don't make a strategy. The critical step many service lines miss is developing a strong foundation for evaluating growth opportunities, to focus limited time and resources toward the highest-value opportunities.
We have identified four steps for building this foundation to identify growth initiatives that are aligned with your market. This process can help you identify both the what and the how for positioning your service line for success.
Evaluate opportunities using a comprehensive, data-driven market analysis: Use a clear, consistent methodology for evaluating and prioritizing all growth opportunities to avoid influencing the outcomes. This analysis should be organized around business questions to reveal if it's a strong opportunity in your specific market.
Develop a customer-centric plan: Use a stakeholder analysis to get the perspective of your customers—including patients, payers, and providers—to surface critical success factors, and how you can realistically differentiate your program against competitors to customers.
Plan for successful implementation by looking ahead: Incorporate multidisciplinary perspectives to anticipate roadblocks and critical support systems for success, secure buy-in from all stakeholders, and create a workplan to track progress.
- Evaluate outcomes and course correct as needed: Measure performance of growth initiatives at regular intervals against your metrics of success. When desired outcomes are not achieved, identify barriers and adapt your strategy.
While Covid-19 has changed some of the considerations for each of these steps, the process will stay the same. Now is the time for service line leaders to develop a sustainable roadmap for evaluating and implementing new opportunities that will set them up for success today, and in the future.
Need help building your service line growth plan?
Our teams are working with health care strategy and service line leaders across the country to implement and enhance this process for their service lines. Interested in learning more or sharing what’s worked for you? Email me at email@example.com